CBC sets countercyclical capital buffer at 0%

The countercyclical capital buffer (CCyB) rate for the period 1 January 2018 – 31 March 2018 has been set at 0%, the Central Bank of Cyprus said on Tuesday.

On 5 December 2017, the Central Bank of Cypus (CBC), in accordance with the methodology described in its macroprudential policy, set the CCyB rate for the period 1 January 2018 – 31 March 2018 at 0% of the total risk exposure amount of each licenced credit institution and each investment firm that provides the investment services of dealing on own account or underwriting of financial instruments and / or placing of financial instruments on a firm commitment basis; and has not been exempted by the CBC due to its small or medium size the Central Bank said in a press release.

Based on the time series ending on 30 June 2017:

The gap between the credit-to-GDP ratio and its long-term trend (credit-to-GDP gap) based on the broad credit definition is -40,3%

The gap between the credit-to-GDP ratio and its long-term trend (credit-to-GDP gap) based on the narrow (bank) credit definition is -43,4%.

Given that the credit-to-GDP gap is lower than 2% and taking into account the additional indicators that were assessed by the CBC, the benchmark buffer guide is 0% and the CCyB rate has been set at 0%.

In addition to the credit-to-GDP gap, the CBC takes into account a range of quantitative and qualitative information in its assessment of system-wide risks associated with periods of excessive growth. The additional indicators assessed by the CBC are: non-financial private sector indebtedness; banking sector resilience; the real estate market; the real economy; and external imbalances. The summary table of indicators used by the CBC is set out in this file.

Source: Cyprus News Agency